The surprising stability of Bitcoin during market turbulence
Bitcoin was holding around $70,000 this week, which honestly surprised some traders given everything that is happening in global markets. The cryptocurrency soared to nearly $71,000 at one point, up about 7% from Sunday’s lows. This occurred even as geopolitical tensions intensified over the Iran conflict and markets faced risks ranging from oil supply disruptions to strains in private credit markets.
What’s interesting is how this compares to other assets. The Nasdaq 100 and S&P 500 remained roughly flat over the same period. Gold, which usually gets a boost in times of crisis, saw only modest gains. Looking at March’s performance so far, Bitcoin is actually the only one of these three to post gains.
Break away from software stocks
There is one other change that traders are noticing. Bitcoin appears to be breaking its close correlation with struggling software stocks. Over the past five days, BlackRock’s spot bitcoin ETF (IBIT) is up 3.75%, while the iShares Expanded Tech-Software ETF (IGV) is down 2.45%. This divergence is quite significant when you consider how well these assets have moved together in recent years.
Aurélie Barthere, Senior Research Analyst at Nansen, pointed out something I found interesting. She highlighted how little Bitcoin reacted to the new geopolitical headlines. “Bitcoin’s downside sensitivity has been relatively limited,” she said, adding that some traditional benchmarks like the Euro Stoxx index fell more sharply during the same period.
Change the relationship with gold
Another development gaining attention is Bitcoin’s changing correlation with gold. According to Bryan Tan, a trader at crypto trading firm Wintermute, the Bitcoin-gold correlation turned positive, going from -0.49 to +0.16 just a week ago.
During the initial phase of the Middle East conflict, Bitcoin fell while gold rebounded, in what Tan called a “classic risk-off move.” However, more recently, both assets have risen together as the US dollar has weakened. This suggests that investors may start treating them both as beneficiaries of dollar weakness rather than opponents of risky trades.
“If this correlation continues to follow a positive trend,” Tan noted, “it shifts the discourse around Bitcoin in a conflict environment from ‘sell the risky asset’ to something more nuanced.”
ETF Flows Improve
There is also positive news on the ETF side. Bitcoin ETF flows trended negatively for months after the October peak. But data from the past two weeks shows notable improvement, according to Joe Edwards, head of research at Enigma.
IBIT has attracted nearly $1 billion in new inflows so far in March, after losing more than $3 billion between November and February, according to SoSoValue data. Edwards believes a sustained recovery in ETF demand could be key to Bitcoin’s next phase of growth, as many analysts believe Bitcoin’s future depends on access to deeper institutional capital pools through ETF investors in brokerage accounts.
The recent wave of exoduses is concerning, Edwards admitted, but he sees signs that this period may be ending. If the trend continues in the coming weeks, it could support a broader Bitcoin rally in the second quarter.
What strikes me about all this is how the role of Bitcoin seems to be evolving in real time. It is no longer just a pure risk asset, nor an exact imitation of gold. The market seems to be understanding what Bitcoin actually is in different contexts, and this process itself could create some stability where there wasn’t much before.
